E-commerce bonds: a relative value analysis

Bonds
Althea Spinozzi

Head of Fixed Income Strategy

Summary:  E-commerce bonds offer in average lean leverage and healthy credit ratios. While the average yield across maturities in euro is near zero, in US dollar it's around 1.7% with some companies offering yields well above 3%. We find that corporates with exposure to the hospitality sector offer the highest risk amid the Covid-19 pandemic with Expedia most likely to suffer from a rating downgrade in the coming months. Credit quality of the rest of e-commerce corporates is high offering safe assets within the investment-grade space.


Following Peter’s analysis of e-commerce stocks, I would like to analyze the bonds that are offered by this sector. 

Not all of the companies indicated by Peter have bonds; however, for those that do, we find that they offer an average yield of 1.7% in US dollar and near-zero yields in euro. Of course, bond yields vary vastly according to the duration and rating of a bond. Still, such a low average yield indicates that e-commerce credits are qualitatively high. For simplicity, in this analysis, we will analyze only US dollar bonds as near-zero yields offered by euro bonds makes them less exciting.

The bond list is characterized by notes with an investment-grade rating except for Tripadvisor and Angi Homeservices, and offer maturities ranging from 2021 until 2060.

Looking at the fundamentals, we immediately see that, on average, e-commerce corporates are sound with lean leverage. Nevertheless, it is not the case for Expedia (S&P: BBB-; Moody’s Baa3) which offers the highest leverage with a net debt to EBITDA of 4.38x compared to the list's median of -1.55x. Besides, the company's credit conditions look shaky compared to other investment-grade peers because of its high negative operating margins.

Also Tripadvisor (S&P: B-; Moody’s B1) doesn't shine, as it presents negative operating margins as well as negative interest coverage. It is important to note, however, that in contrast with Expedia, Tripadvisor is rated as junk. Hence, Expedia is exposed to a downgrade risk while Tripadvisor is not. With this in mind, Tripadvisor US dollar notes with maturity 2025 (USU8966TAA61) offer a yield close to 5%, while Expedia notes with similar maturities (USU3010DAH36) offer around 200bps less.

It is important to note that Tripadvisor, Expedia and Booking Holdings operate in the hospitality business. Therefore, if countries' lockdown measures amid the Covid-19 pandemic continue to restrict the movement of people, we can expect the fundamentals of these companies to deteriorate further. Within this context, Booking Holdings looks to be in better conditions to weather the crisis compared to the two, with a good rating of A- (S&P), and healthy credit ratios. However, quality doesn't come cheap as investors will get only 2% in yield for a 10-year note (US09857LAR96).

The company that looks to be offering the best tradeoff between risk and reward it is Angi Homeservices. Angi is active within the home services digital market place. Even though it is rated junk by Moody's and S&P (Ba3; BB-),  the company has healthy leverage and good interest coverage ratio, even once capital expenditures are taken into account. It is important to note that Angi is a much smaller company compared to peers. Hence, its notes bring much higher liquidity and refunding risk compared to others. The company offers only bonds with 2028 maturity (USU0035LAA71), which offer a yield of 3.6%, around 40bps points higher than Expedia's bonds with similar maturity (US30212PAP09).

Looking away from higher-yielding e-commerce companies, the list offers high quality and safe investments. The two companies that stand out in terms of quality are Amazon and Alibaba.  Alibaba provides a higher yield for bonds of the same maturity. Still, the credit quality of the company is way better than Amazon, as it is characterized by higher operating margins and interest coverage and a negative net debt to EBITA. The Alibaba 2037 (US01609WAU62) offers a yield of 2.7% compared to Amazon 2037 (US023135BF28), which offer only 2.1% in yield.
IssuerCurrencyMaturityRatingCouponYield MinimumID_ISIN
USD
ANGI GROUP LLCUSD8/15/2028BB-3.875%3.6%50kUSU0035LAA71
ALIBABA GROUP HOLDINGUSD12/6/2027A+3.400%1.6%200kUS01609WAT99
ALIBABA GROUP HOLDINGUSD11/28/2024A+3.600%1.0%200kUS01609WAQ50
ALIBABA GROUP HOLDINGUSD12/6/2047A+4.200%2.9%200kUS01609WAV46
ALIBABA GROUP HOLDINGUSD11/28/2021A+3.125%0.3%200kUS01609WAP77
ALIBABA GROUP HOLDINGUSD12/6/2057A+4.400%2.9%200kUS01609WAW29
ALIBABA GROUP HOLDINGUSD12/6/2037A+4.000%2.7%200kUS01609WAU62
ALIBABA GROUP HOLDINGUSD11/28/2034A+4.500%2.4%200kUS01609WAR34
ALIBABA GROUP HOLDINGUSD6/6/2023A+2.800%0.6%200kUS01609WAS17
ALIBABA GROUP HOLDINGUSD11/28/2024A+3.600%1.0%200kUSG01719AE63
ALIBABA GROUP HOLDINGUSD11/28/2021A+3.125%0.5%200kUSG01719AA42
ALIBABA GROUP HOLDINGUSD11/28/2034A+4.500%2.4%200kUSG01719AF39
AMAZON.COM INCUSD6/3/2050A+2.500%2.4%50kUS023135BT22
AMAZON.COM INCUSD6/3/2060A+2.700%2.5%50kUS023135BU94
AMAZON.COM INCUSD6/3/2030A+1.500%1.3%50kUS023135BS49
AMAZON.COM INCUSD8/22/2057A+4.250%2.7%50kUS023135BM78
AMAZON.COM INCUSD8/22/2047A+4.050%2.5%50kUS023135BJ40
AMAZON.COM INCUSD12/5/2044A+4.950%2.4%50kUS023135AQ91
AMAZON.COM INCUSD6/3/2025A+0.800%0.6%50kUS023135BQ82
AMAZON.COM INCUSD8/22/2027A+3.150%1.0%50kUS023135BC96
AMAZON.COM INCUSD6/3/2027A+1.200%1.0%50kUS023135BR65
AMAZON.COM INCUSD8/22/2037A+3.875%2.1%50kUS023135BF28
AMAZON.COM INCUSD11/29/2022A+2.500%0.3%50kUS023135AJ58
AMAZON.COM INCUSD6/3/2023A+0.400%0.3%50kUS023135BP00
AMAZON.COM INCUSD8/22/2024A+2.800%0.6%50kUS023135AZ90
AMAZON.COM INCUSD12/5/2034A+4.800%1.7%50kUS023135AP19
AMAZON.COM INCUSD12/3/2025A+5.200%0.7%50kUS023135BN51
AMAZON.COM INCUSD2/22/2023A+2.400%0.3%50kUS023135AW69
AMAZON.COM INCUSD12/5/2021A+3.300%0.1%50kUS023135AM87
AMAZON.COM INCUSD12/5/2024A+3.800%0.6%50kUS023135AN60
BOOKING HOLDINGS INCUSD4/13/2030A-4.625%2.1%50kUS09857LAR96
BOOKING HOLDINGS INCUSD4/13/2025A-4.100%1.1%50kUS09857LAP31
BOOKING HOLDINGS INCUSD6/1/2026A-3.600%1.3%50kUS741503AZ91
BOOKING HOLDINGS INCUSD4/13/2027A-4.500%1.6%50kUS09857LAQ14
BOOKING HOLDINGS INCUSD3/15/2023A-2.750%0.7%50kUS741503BB15
BOOKING HOLDINGS INCUSD3/15/2025A-3.650%1.1%50kUS741503AW60
BOOKING HOLDINGS INCUSD3/15/2028A-3.550%1.7%50kUS741503BC97
EXPEDIA GROUP INCUSD2/15/2030BBB-3.250%3.2%50kUS30212PAR64
EXPEDIA GROUP INCUSD2/15/2028BBB-3.800%3.2%50kUS30212PAP09
EXPEDIA GROUP INCUSD2/15/2026BBB-5.000%2.9%50kUS30212PAM77
EXPEDIA GROUP INCUSD5/1/2025BBB-7.000%1.8%50kUSU3010DAJ91
EXPEDIA GROUP INCUSD8/15/2024BBB-4.500%2.0%50kUS30212PAJ49
EXPEDIA GROUP INCUSD5/1/2025BBB-6.250%3.1%50kUSU3010DAH36
EXPEDIA GROUP INCUSD12/15/2023BBB-3.600%2.2%50kUSU3010DAK64
EXPEDIA GROUP INCUSD8/1/2027BBB-4.625%3.4%50kUSU3010DAL48
EXPEDIA GROUP INCUSD2/15/2030BBB-3.250%3.1%50kUSU3010DAG52
EXPEDIA GROUP INCUSD2/15/2026BBB-5.000%3.0%50kUSU3010DAE05
JD.COM INCUSD1/14/2030BBB3.375%2.2%200kUS47215PAE60
JD.COM INCUSD4/29/2026BBB3.875%1.7%200kUS47215PAC05
JD.COM INCUSD4/29/2021BBB3.125%1.2%200kUS47215PAB22
JD.COM INCUSD1/14/2050BBB4.125%3.6%200kUS47215PAF36
MEITUANUSD10/28/2030BBB-3.050%2.7%200kUSG59669AC89
MEITUANUSD10/28/2025BBB-2.125%1.9%200kUSG59669AB07
TRIPADVISOR INCUSD7/15/2025B+7.000%4.8%50kUSU8966TAA61
EBAY INCUSD7/15/2042BBB4.000%3.1%50kUS278642AF09
EBAY INCUSD7/15/2022BBB2.600%0.4%50kUS278642AE34
EBAY INCUSD8/1/2024BBB3.450%0.8%50kUS278642AL76
EBAY INCUSD1/30/2023BBB1.084%0.5%50kUS278642AT03
EBAY INCUSD3/11/2025BBB1.900%0.9%50kUS278642AV58
EBAY INCUSD1/30/2023BBB2.750%0.5%50kUS278642AS20
EBAY INCUSD6/5/2027BBB3.600%1.5%50kUS278642AU75
EBAY INCUSD3/9/2022BBB3.800%0.4%50kUS278642AN33
EBAY INCUSD3/11/2030BBB2.700%2.0%50kUS278642AW32
EUR
BOOKING HOLDINGS INCEUR3/3/2027A-1.800%0.4%100kXS1196503137
BOOKING HOLDINGS INCEUR9/23/2024NR2.375%0.1%100kXS1112850125
BOOKING HOLDINGS INCEUR3/10/2022A-0.800%-0.3%100kXS1577747782
BOOKING HOLDINGS INCEUR11/25/2022A-2.150%-0.2%100kXS1325825211
EXPEDIA GROUP INCEUR6/3/2022BBB-2.500%0.5%100kXS1117297512

Quarterly Outlook

01 /

  • Macro Outlook: The US rate cut cycle has begun

    Quarterly Outlook

    Macro Outlook: The US rate cut cycle has begun

    Peter Garnry

    Chief Investment Strategist

    The Fed started the US rate cut cycle in Q3 and in this macro outlook we will explore how the rate c...
  • Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges

    Quarterly Outlook

    Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges

    Althea Spinozzi

    Head of Fixed Income Strategy

  • Equity Outlook: Will lower rates lift all boats in equities?

    Quarterly Outlook

    Equity Outlook: Will lower rates lift all boats in equities?

    Peter Garnry

    Chief Investment Strategist

    After a period of historically high equity index concentration driven by the 'Magnificent Seven' sto...
  • FX Outlook: USD in limbo amid political and policy jitters

    Quarterly Outlook

    FX Outlook: USD in limbo amid political and policy jitters

    Charu Chanana

    Chief Investment Strategist

    As we enter the final quarter of 2024, currency markets are set for heightened turbulence due to US ...
  • Commodity Outlook: Gold and silver continue to shine bright

    Quarterly Outlook

    Commodity Outlook: Gold and silver continue to shine bright

    Ole Hansen

    Head of Commodity Strategy

  • FX: Risk-on currencies to surge against havens

    Quarterly Outlook

    FX: Risk-on currencies to surge against havens

    Charu Chanana

    Chief Investment Strategist

    Explore the outlook for USD, AUD, NZD, and EM carry trades as risk-on currencies are set to outperfo...
  • Equities: Are we blowing bubbles again

    Quarterly Outlook

    Equities: Are we blowing bubbles again

    Peter Garnry

    Chief Investment Strategist

    Explore key trends and opportunities in European equities and electrification theme as market dynami...
  • Macro: Sandcastle economics

    Quarterly Outlook

    Macro: Sandcastle economics

    Peter Garnry

    Chief Investment Strategist

    Explore the "two-lane economy," European equities, energy commodities, and the impact of US fiscal p...
  • Bonds: What to do until inflation stabilises

    Quarterly Outlook

    Bonds: What to do until inflation stabilises

    Althea Spinozzi

    Head of Fixed Income Strategy

    Discover strategies for managing bonds as US and European yields remain rangebound due to uncertain ...
  • Commodities: Energy and grains in focus as metals pause

    Quarterly Outlook

    Commodities: Energy and grains in focus as metals pause

    Ole Hansen

    Head of Commodity Strategy

    Energy and grains to shine as metals pause. Discover key trends and market drivers for commodities i...

Disclaimer

The Saxo Group entities each provide execution-only service, and access to analysis permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Inspiration Disclaimer and (v) Notices applying to Trade Inspiration, Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular, no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Trading in financial instruments carries risk, and may not be suitable for you. Past performance is not indicative of future performance. Please read our disclaimers:
Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
Full disclaimer (https://www.home.saxo/en-sg/legal/disclaimer/saxo-disclaimer)

None of the information contained here constitutes an offer to purchase or sell a financial instrument, or to make any investments. Saxo Markets does not take into account your personal investment objectives or financial situation and makes no representation and assumes no liability as to the accuracy or completeness of the information nor for any loss arising from any investment made in reliance of this presentation. Any opinions made are subject to change and may be personal to the author. These may not necessarily reflect the opinion of Saxo Markets or its affiliates.

Saxo Markets
88 Market Street
CapitaSpring #31-01
Singapore 048948

Contact Saxo

Select region

Singapore
Singapore

Saxo Capital Markets Pte Ltd ('Saxo Markets') is a company authorised and regulated by the Monetary Authority of Singapore (MAS) [Co. Reg. No.: 200601141M ] and is a wholly owned subsidiary of Saxo Bank A/S, headquartered in Denmark. Please refer to our General Business Terms & Risk Warning to consider whether acquiring or continuing to hold financial products is suitable for you, prior to opening an account and investing in a financial product.

Trading in financial instruments carries various risks, and is not suitable for all investors. Please seek expert advice, and always ensure that you fully understand these risks before trading. Trading in leveraged products such as Margin FX products may result in your losses exceeding your initial deposits. Saxo Markets does not provide financial advice, any information available on this website is ‘general’ in nature and for informational purposes only. Saxo Markets does not take into account an individual’s needs, objectives or financial situation.

The Saxo trading platform has received numerous awards and recognition. For details of these awards and information on awards visit www.home.saxo/en-sg/about-us/awards.

The information or the products and services referred to on this website may be accessed worldwide, however is only intended for distribution to and use by recipients located in countries where such use does not constitute a violation of applicable legislation or regulations. Products and Services offered on this website are not intended for residents of the United States, Malaysia and Japan. Please click here to view our full disclaimer.

This advertisement has not been reviewed by the Monetary Authority of Singapore.

Apple and the Apple logo are trademarks of Apple Inc, registered in the US and other countries and regions. App Store is a service mark of Apple Inc. Google Play and the Google Play logo are trademarks of Google LLC.